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1.3 Scope and Underlying AssumptionsThe scope of this research is limited to answering the research question and toproviding input for the achievement of the aims and objectives of the study. Theanalysis will be based upon the results obtained from interviews with middlemanagers at ABN AMRO Bank – Brazil about the process of project portfoliomanagement. Assumptions of this report are that all managers are involved in projectportfolio management and are aware of the tools and techniques used in the field aswell as that candid responses will be given at all times regarding the level ofutilization of PPM for innovation.1.4 Research ScheduleMilestoneDefinition of research topic and questionSelection of articlesDesign of background problemLiterature ReviewMethodologyDesign and approval of interview questionsInterviewsAnalysis of interviewsConclusionReview and final adjustmentsSubmission of workCompletion DateAugust 28, 2007September 30, 2007October 05, 2007November 05, 2007November 14, 2007November 15, 2007December 12-14, 2007December 15-22, 2007December 28, 2007January 05, 2008January 08, 20081.5 Research MethodsSelection of Secondary SourcesThe research started with readings in the field of project portfolio management andinnovation. Both theoretical and practitioner literature was found through onlinedatabases such as EBSCO, Science Direct and Blackwell Synergy. Articles wereselected through keywords as project portfolio management; innovation; projectmanagement; strategy; competitive advantage; and new product development injournals such as Project Management Journal, International Journal of ProjectManagement, Journal of Product Innovation Management, European Journal ofInnovation Management and R&D Management Journal. Since the field of projectportfolio management has surfaced as an important management function in the pastdecade, the articles researched were generally from the year 2000 onwards.Furthermore, when researching for innovation concepts and process, many of thearticles found focused on research and development in the pharmaceutical industry oron information technology. For the sake of the research, those were only consideredas a source of key definitions.9

Theory and ResearchAccording to Collis and Hussey (2003), some of the objectives of research are tocontribute to the existing body of knowledge through the review of establishedtheories and the creation of new ones, to understand and explain new phenomenonand to present a problem and possible solutions. Furthermore, research is a systematicprocess that entails several different considerations in the presentation andinterpretation of data. This specific research is exploratory in nature, and it aims atlooking at ‘patterns, hypotheses or ideas’ that will be studied to form the platform forfurther work.The process of business research is made up of deductive and inductive theory.Deductive theory presents a reverse process that formulates a hypothesis based onalready existing observations and findings whereas in the inductive process,observation and findings form the theory and the outcome of research. Both processesare illustrated below:Figure 1.1: Deductive and inductive processesSource: Neville, 2005: p. 4This case study is based on an inductive approach which intends to generate ideas outof data collected at ABN AMRO – Brazil. The goal is to make considerations on howthe process of portfolio management is carried out in the bank in respect to what hasbeen learned in theory. In order to do so, semi-structured interviews with managers atABN AMRO – Brazil will be carried out in order to provide qualitative data in theform of detailed answers to questions on how project portfolio managementcontributes to product innovation. Underlying themes in the interviews will includethe popularity of portfolio management tools and techniques and their implementationin the financial institution. Although the process in inductive, it will not necessarilygenerate theory. Bryman and Bell (2003: p.13) argue that ‘inductive strategy asassociated with qualitative research is not entirely straightforward ( ) and often usestheory as a background to qualitative investigations’. This means that the inductiveprocess carried out in this research will be based on existing theories and itsconclusion aims at supporting them.Other issues affecting business research are the epistemological and ontologicalconsiderations regarding the field of study. Bryman and Bell (2003, p. 13) state that‘an epistemological issue concerns the question of what is (or should be) regarded asacceptable knowledge in a discipline’. Epistemological considerations make up aformal structure which can be divided into two sciences called positivism andinterpretivism. Positivism encourages the use of methods common to the studies of10

natural sciences to the investigation of social phenomena and for the explanation ofhuman behaviour. It argues the objective nature of research, which is dependent uponthe explanation of behaviours through facts and observations. Interpretivism opposesthat theory by arguing that these methods diverge because of the ‘fundamentallydifferent nature’ of people and institutions, encouraging the understanding of humanbehaviour (Bryman and Bell, 2003). Interpretivism, or critical interpretive research,argues the world is socially constructed and subjective, and that there is ‘no realityoutside of people’s perceptions’ (Veal and Ticehurst, 1999: p. 20). The nature of thisresearch lies in interpretivism because of the impossibility of disregarding the humaninteraction in the environment and the impact of such relation in the results obtainedin the data collection phase. Human action in this study plays a major role in theadoption of the necessary tools and techniques required to generate innovativeproducts and in the support for the implementation of project portfolio management.Some of the advantages of using interpretivism in the approach of research design isthat enables the understanding of important social processes (Saunders, 2000).The main concern of ontology goes beyond the ‘bare existence of individuals’ andfocuses on their ‘forms of being’ (Guarino, 1995: p. 629). Ontological issuessurround the nature of social entities and closely relate to epistemologicalconsiderations. Main aspects in ontology lie in propositions by objectivism andconstructionism. According to Bryman and Bell (2003) the first term implies that‘social phenomena do not depend upon social actors’ whereas the latter asserts exactlythe opposite, or that ‘social phenomena are produced through social interaction’. Inthe case of the research undertaken at a large financial institution, it is important tounderstand how the understanding, knowledge and perceptions of individuals impactthe implementation of certain important processes required for competitive advantage.Table 1.1 presents the fundamental differences between quantitative and qualitativeapproaches and indicates the specific area of knowledge creation in which thisresearch is based.Principal orientation to the role oftheory in relation to researchEpistemological orientationOntological orientationQuantitativeQualitativeDeductive; testing theoryInductive; generation of theoryNatural science model; Table 1.1: Fundamental differences between quantitative and qualitative researchstrategiesSource: Bryman and Bell 2003, p. 25The table above shows the epistemological and ontological considerations involved inthe formation of knowledge acquired through business research; the circle indicateswhere this case study lies. The first includes positivism and interpretivism whereasthe latter is made up by objectivism and constructionism. In terms of researchstrategy, is possible to list both quantitative and qualitative approaches, whichaccording to Byman and Bell (2003), relate to both epistemological and ontologicalconsiderations.11

Chapter 22. Literature Review2.1 Similar StudiesSolid academic work cannot be created without a thorough investigation of theexisting body of knowledge in the area of the chosen studies. Knowledge is built uponexisting theories, which help develop further understanding and support new findings.This section will discuss some of the previous studies done in the field of innovation,portfolio management, product development and strategy, which are topics andsubtopics of this particular research. Most of the research discussed below has beenused as the foundation for this case study, particularly the interview questions used bythe authors to identify ‘issues, goals, concerns, metrics, and types of portfoliomethods used’ (Cooper et al. 2001: p. 363).Cooper (1984) and Cooper et al. (1999, 2000, 2001 and 2007) have extensivelyresearched portfolio management practices for product innovation in large number ofcompanies from different industries. Cooper (1984) explored the link between newproduct performance and strategy based on product programs from different firms. Inthe background study, the author argued that ‘product innovation is the route togrowth and prosperity’, and found that companies with a better competitive edge hadstronger market orientation in their innovation efforts. Cooper et al. (1999) arguedthat project portfolio management is vital for product innovation, listing some of theattributes that make it a priority for management. Among the most used methods forportfolio selection, financial was identified as the number one. The research was donein 205 businesses, segmented among high technology, processed materials, consumergoods industrial product and others. Managers were given detailed surveyquestionnaires with questions that included perceptions of portfolio methods,approaches used and overall performance. Cooper et al. (2000) explored the topic ofnew product development by connecting it to portfolio management. The authorsargued that succeeding with a new product strategy depended upon doing projectsright and doing the right projects. Portfolio management appeared as the tool forselection of ‘new product winners’ and of strategic alignment between the firm’smarket effort and new product development. In this study, the reasons of importanceof project portfolio management for innovation in firms were investigated, along withthe effectiveness of project portfolio selection methods and challenges and problemsin the area of project portfolio management. In another exploratory study of thirtyfirms, Cooper et al. (2001) sought to learn about the level of support of seniormanagement to portfolio management, the most common techniques implementedalong with their popularity and what distinguishes the best firms from the worst.Cooper et al. (2007) also investigated why some firms are successful at productinnovation and identified portfolio management and resource allocation as one of thefour major performance drivers. These drivers were depicted as a diamond, which atits center laid a business’s new product performance.12

Although most research in the field of project portfolio management regardinginnovation has its foundation in R&D, it is possible to list some studies on the topicundertaken in the financial industry (Scuilli, 1998; Montes et al., 2003; Gardiner andGallo, 2007). Scuilli (1998) studied the adoption of incremental innovation in thebanking/financial industry and found that smaller companies with fewer levels ofhierarchy and formalization were able to achieve better results. Scuilli (1998) alsolinked investment banking to innovation, studying it as a product that undergoesconstant changes. At the end of her research, she also signalled that radicalinnovation was more likely to be found at larger companies, with greater availabilityof resources. Montes et al. (2003) explored how quality and innovation relate to eachother in bank branches through empirical research with a sample of employees fromeighty different bank offices. The study also sought to investigate the relationshipbetween organizational climate (work satisfaction, commitment and motivation) to theachievement of innovation goals. Gardiner and Gallo (2007) researched the UKfinancial sector and the need for strategic change through ‘projects or projectportfolios’. The authors argued that innovation was among one of the challenges offinancial organizations, and said that high levels of uncertainty dictated the need for aflexible approach to project management.Important research has also been done in the field of innovation and competitiveadvantage. Studies confirmed that innovation leads to competitive advantage, and thatinnovative firms outperform their competitors in terms of market share, profitability,growth or market capitalization (Tidd et al., 2005). Another example thatdemonstrates the need to innovate in order to compete was the study conducted byPeters and Waterman (1982) quoted in Kandampully and Duddy (1999) that includedforty-three of the best run companies in the USA, but by the time they finished theirbook, only two years later, fourteen companies were in financial trouble. A BusinessWeek study later reported that those companies had failed to anticipate, react andrespond to changes in the market place (Kandampully and Duddy, 1999). Theseauthors also demonstrated in their research how continuous improvement does notguarantee competitive advantage, emphasizing the need for market knowledge andstrategic planning in the innovation process.2.2 Background of Project Portfolio Management3. Project Portfolio Manage ment2. Program ManagementMulti-project environmentThe development of project portfolio theory in this section will be presented in thefollowing way:1. Project ManagementFigure 2.1: Development of portfolio management theorySource: Adapted from Müller (2005)Each framework will be discussed along with its background: project managementand post-WWII engineering; program management and integration; project portfoliomanagement and high-level multi-project management.13

Project ManagementThe beginning of project management can be traced to a report published by the UKInstitution of Civil Engineers on post WWII national development. The documentpointed out the need for a ‘systemic approach’ with a planned break down of activitiesto achieve a fixed objective (Wideman, 1995). To answer to that demand,construction projects such as the Polaris program by the U.S. Navy and the ApolloProgram by NASA were initiated. These projects were managed on an ad-hoc basiswith the aid of tools such as the WBS, Gantt Charts and Critical Path Method.Cleland (1999: p. 91) refers to ‘projects, as building blocks in the design andexecution of organizational strategies, with the means for bringing about realizablechanges in products and processes.’ Similarly, the Project Management Institutestates that a project is a ‘temporary endeavour to create a unique product, service, orresult’. Projects have constraints such as ‘scope, time and cost’; ‘quality’ is ultimatelyaffected by the balance between these three elements. The process of projectmanagement is explained by stages such as project initiation, planning, execution,control and closure. (PMBOK 2004: pp.5-8). The figure below illustrates ClosingFigure 2.2: The project management processSource: PMBOK (2000)In the initiation phase, the project is reviewed for organizational fit and overallcontribution to strategic objectives. This step includes a feasibility study, marketresearch and the organization of the PMO. In the planning phase, people across theorganization pool their knowledge to define the scope and the project’s roadmap. Atthis stage, different types of plans are defined, such as financial, resource, quality andcommunications. The following step comprises the definition of deliverables based onthe various work packages. In controlling, the project’s deliverables, scope, risk andresources are monitored to ensure minimum or zero deviations, as well as overallsuccess. The final stage, called closing, includes decommissioning of resources,handing over of project documentation and releasing final deliverables.Finally, as part of the analysis of project management, it is important to list some ofthe elements that affect project success (Leintz and Rea, 1995): The clarity of project objectivesThe integration of project objectives and scopeThe interaction between the project and the organization’s strategyThe skills of the project management team in implementing the project’sobjectives14

Program ManagementIn the 1960s, the concept of program management emerged from a need of a systemicview of all the organization’s projects. According to Morris and Jamielson (2005)program management is a powerful tool for implementing strategy because it includesall projects and programs undertaken by the organization. Most definitions of theterm refer to the coordinated management of a collection of interrelated projects. ThePMBOK (2004) adds that through a program an organization is able to achievebenefits that cannot be reached through managing projects individually. Gardiner(2005) also emphasizes that program management helps the firm to introduce a widerorganizational context into their project management culture. Gardiner (2005) notesthat program management (or management by projects) consists of a portfolio ofprojects, carefully prioritized and selected to implement the organization’s strategicplan, with phases such as ‘initiation, planning, delivery, renewal and dissolution’(Pellegrinelli, 1997). Program management is strategic in nature, with ongoingoperations for a given business unit that help an organization retain a strong customerfocus (Boznak, 1996). Such organisation-wide programme governance frameworkhas risen from the need of companies to respond the challenges of their competitivemarkets. The differences between project management and program management arelisted below:Table 2.1: Comparison of program and project managementSource: Pellegrinelli (1997: p. 142)The differences presented in table 2.1 reinforce the idea that as organizations began toface increased pressures stemming from globalization, rapidly changing levels oftechnology and inconsistent consumer tastes, program management became anecessity. Program management helped organize both potential and approvedprojects and activities, and presented an integrated approach to project management.It answered to the need of working with higher level objectives that helped implementbusiness strategy. It made important projects visible to top man

return on investment, appropriate balance of the portfolio and strategic alignment of the portfolio with the business objectives. This allows for a better mix of projects and more efficiency in the creation of new products. It is crucial that companies adopt project portfolio management when dealing with new product initiatives. Project portfolio management creates a funnelling process that .